Supreme Court Admits EY US’s ₹368-Crore Secondment Tax Case — What It Means for Every Secondment Arrangement
Ernst & Young U.S. LLP has persuaded the Supreme Court to hear its challenge to a Delhi High Court ruling that taxed its secondment reimbursements from Indian affiliates as Fees for Technical Services — reopening, at India’s highest court, a question many multinational groups assumed Centrica had already settled in the Department’s favour.
By an order dated 26 October 2026 (Special Leave to Appeal (C) No. 36320/2026), a bench of Justices J.B. Pardiwala and K. Vinod Chandran admitted EY US’s petition and issued notice to the Income Tax Department, returnable 1 December 2026, with dasti service permitted. The dispute runs across five assessment years, 2018-19 to 2022-23, and — on a reading of the Assessing Officer’s year-wise figures reported by TaxGuru — totals roughly ₹368 crore in secondment-receipt and US-rendered-service charges combined across those years. Different outlets have headlined different single-year figures drawn from within that total; the aggregate is this article’s own calculation from the reported year-wise breakup, not a figure any single source states outright.
What the Delhi High Court Found
EY US seconded personnel to three EY India entities — EY GBS (India) Pvt Ltd, EY Global Delivery Services India LLP, and Ernst & Young LLP — under deputation arrangements, with the Indian entities reimbursing EY US for the seconded employees’ salary and related employment costs. The ITAT, in orders dated 20 June 2023 and 7 August 2024, held across the disputed years that these were cost-to-cost reimbursements, not Fees for Technical Services under Article 12 of the India-US Double Taxation Avoidance Agreement.
The Delhi High Court reversed this on the Department’s appeal, deciding five revenue appeals in its favour. Its reported reasoning leaned heavily on the Supreme Court’s own earlier decision in Centrica India Offshore Pvt. Ltd.: the seconded employees retained their lien with EY US, and the Indian entities’ disciplinary authority over them was limited to misconduct, fraud, wilful negligence or illegal acts — short of the full control a genuine employer would exercise. On that basis, the Court held the “make available” test under Article 12 was satisfied, finding a transfer of skill or knowledge in the secondment arrangement itself, and set aside the ITAT’s order for not having engaged with Centrica at all. Some issues relating to other professional-service receipts were sent back to the ITAT for fresh consideration.
What Happens Next
Admission of the SLP and issuance of notice do not decide anything on the merits — they mean the Supreme Court considers the question worth examining, not that the Delhi High Court erred. EY US’s reported position is that the payments were genuine cost-to-cost reimbursements with no profit element, and should fall outside taxable income on that basis alone, independent of the FTS “make available” analysis. The matter is expected to be listed for a substantive hearing once the Department files its response to the notice.
Why It Matters
- Secondment arrangements between foreign and Indian group entities are routine across IT, consulting, BPO and shared-services groups — this is not a niche fact pattern, and several similar disputes are likely pending at various forums.
- This reopens, rather than closes, the “secondment versus manpower supply” question that Centrica was meant to settle in 2014. That the Delhi High Court needed to specifically fault the ITAT for not applying Centrica suggests tribunals and taxpayers still find room to distinguish their facts from it.
- A Supreme Court ruling here could sharpen or soften the “lien and control” test that every India secondment agreement is implicitly drafted against.
Practical Implications
Taxpayers with pending secondment-tax disputes at any forum should treat this SLP as a developing precedent to track, not as settled law in either direction. Groups structuring new secondment arrangements should revisit documentation around the seconded employee’s lien with the foreign employer, the Indian entity’s actual (as opposed to nominal) disciplinary and control authority, and whether any skill or knowledge is genuinely “made available” beyond the service itself — these are precisely the facts Centrica-line cases turn on.
Action Checklist
- Flag any client with an open secondment-tax dispute at the ITAT, a High Court or the Supreme Court to monitor this matter’s listing after 1 December 2026.
- Review existing secondment or deputation agreements for lien, control and “make available” language against the Centrica fact pattern described above.
- Do not treat the SLP’s admission as a change in law — the Delhi High Court ruling it challenges remains the operative position pending the Supreme Court’s decision.
FAQs
Q: Does this Supreme Court order change the current tax treatment of secondment reimbursements?
No. The Delhi High Court’s ruling in the Department’s favour stands unless and until the Supreme Court decides otherwise.
Q: What’s the next milestone to watch?
The notice is returnable 1 December 2026; the matter is expected to be listed for a substantive hearing once the Income Tax Department files its response.
This article is based on the Supreme Court’s order and professional media reporting of it — Taxscan, TaxGuru, SAG Infotech, Bar & Bench, India Legal and The420.in, each reporting consistent core facts between 2 and 3 November 2026. Finoscape did not independently retrieve the Supreme Court order or the Delhi High Court judgment text within this research cycle; one sourcing article’s own year-wise figures were internally inconsistent in one place, a discrepancy that source itself does not reconcile, so individual-year figures should be read as indicative of scale rather than exact. This article is for general informational purposes and is not legal or tax advice; readers with a specific secondment-tax position should consult a qualified professional.